Oil prices held near a five-month high, as rising geopolitical risks in the Middle East and tight supplies from Mexico helped support prices.
Brent crude futures rose to around $88 a barrel after rising 0.5% on Monday, while West Texas Intermediate crude was around $84. An Israeli airstrike on the Iranian embassy in Syria killed a top military commander and others, and Tehran said it would respond decisively. Mexico’s state-run oil company, Pemex, said it plans to essentially halt exports of Maya crude in the next few months.
Hedge funds are increasingly bullish on crude oil, with money managers’ net long positions in the global benchmark Brent hitting a 13-month high, according to data from ICE Futures Europe. The number of outstanding oil contracts has also recovered to near their highest levels since late 2021.
Crude has gained 14% this year as output cuts by the Organization of the Petroleum Exporting Countries and its allies offset rising supply from outside the group. The OPEC+ alliance is expected to confirm its current output policy at a meeting on Wednesday, leaving it in deficit through the end of the year, according to BloombergNEF.
The focus on supplies on Monday helped oil prices shake off data showing strong U.S. manufacturing activity, which helped bond traders price in fewer interest rate cuts from the Federal Reserve this year, and the dollar index rose to a two-month high. Higher interest rates and a stronger dollar are typically bearish for commodities.
